![]() “There is already a very critical eye in Washington. In Congressional testimony earlier this month, OpenAI founder Sam Altman warned the technology “could go quite wrong," and fears abound that AI’s proliferation could eventually lead to lost jobs. The push to regulate AI could keep any froth building in the sector to a dull roar. “There simply is not enough market cap available to support the buying mania for artificial intelligence," he said. That limited supply is helping fuel the rally in blue-chip stocks, said Joseph Zappia, co-chief investment officer at LVW Advisors. The market for initial public offerings has been largely dormant so far this year, continuing a trend that began in 2022. “What you’re getting with these stocks is pristine balance sheets, stable earnings growth, mostly reasonable valuations, and you have that AI kicker," said Christopher Harvey, head of equity strategy at Wells Fargo Securities. The S&P 500’s multiple is 18.9 times, above its 10-year average of 17.6, according to FactSet.īut some are reassured that the rally is mostly concentrated in established blue-chip stocks, rather than riskier startups without other established business lines. Nvidia trades at 49 times its forward earnings projection, while Microsoft and Meta trade at 31 and 20 times, respectively. That makes me worried for the valuations." “The overall economy is not rising at the gains these stock prices represent. ![]() Those gains are at risk if the rise of AI doesn’t lead to increased productivity in the long run, according to Andy Constan, chief executive officer of Damped Spring Advisors. The tech-heavy Nasdaq Composite has advanced 24%, its best start to a year since 1991, according to Dow Jones Market Data. The S&P 500, which is up 9.5% in 2023, would be down for the year without the contribution of the eight largest tech stocks. Apple, Google parent Alphabet and have each added more than 35%. Microsoft, which in January announced a $10 billion investment in OpenAI, the startup behind ChatGPT, is up 39%. Shares of Nvidia and Facebook parent Meta Platforms have more than doubled this year. The strong forecast reflects “a steep increase in demand related to generative AI and large language models," Nvidia Chief Financial Officer Colette Kress said Wednesday on a conference call with analysts. ![]() Thursday’s rally added nearly $200 billion to its market capitalization, putting it in striking distance of $1 trillion. Nvidia, which makes chips needed to power the technology, unveiled a sales and profit forecast that blew past Wall Street expectations. That interest has led to a dramatic outperformance in big tech shares. His firm launched an actively managed exchange-traded fund last week to bet on AI-related developments. “Investors are extremely interested in this space, even in light of questionable economic data and challenges in equity and fixed-income markets," said David Mazza, chief strategy officer at Roundhill Investments.
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